SOME IMPORTANT FACTS REGARDING INCOME FROM HOUSE PROPERTY
- Rental income from building and land situated in vicinity of building is taxable under IFHP.
- Rental income from vacate plot or land is taxable under IFOS.
- Some time, tenant pay composite rent i.e for building and amenities, than rent related to building is taxable under IFHP and remaining is taxable under IFOS.
- If in subsequent years, if any unrealized rent received, than it will be taxable under IFHP and 30% deduction can also be claimed. Regardless the fact the he / she owned the property or not in the year of realization of rent.
- If anyone owned more than one house , he/she can choose any one house as self occupied and remaining should be available for tax as deemed to be let out.
- Rent for putting up Hoarding on the building is taxable as income from other source
MUNICIPAL TAX
- Municipal Tax is allowed only on paid basis.
- If some part of Municipal tax recovers from tenant, it cannot be considered as income from owner.
Interest on Borrowing Capital
- Interest for pre-construction period are allowed in 5 equal installment, starting from year in which construction is completed.
- Interest on home loan for purchase/ construction are allowable upto 2,00,000/-.
If property is in joint name than each borrower can claim a deduction of 2 Lac each. u/s 24 b. (Which include interest for current year and interest for pre-construction period)
- Interest for repair / renewal/ reconstruction, than only 30,000/- is allowable instead of 2 Lac.
- Interest on borrowed capital allowable on due basis. Hence, anyone can claim deduction u/s 24 b even didn’t paid.
- Any interest which is payable outside India, on which No tds deducted and there is person in India who can be treated as agent. No one can claim deduction u/s 24 b
Other Important Facts:
- If tenant undertake to bear or spent some part of repair and maintenance cost of building. It can not be regarded as rent received/ receivable by owner of property.
- No addition can be made to rent received/ receivable for notional interest on security deposit. As in most of the cases, security deposit is interest free.
- All the benefits regarding interest etc are available only to individual. However, the karta of HUF can claim the benefit.
All the other persons like LLP, Company, Firm can’t claim benefits of Self occupied house.
- Disputed ownership: if the title of the ownership of property is under dispute and in court of law than the decision is up to income tax department (till court gives its decision regarding ownership) that who will be chargeable to tax.
CASE LAWS
- CIT Vs. Delhi cloth and general mills: when the letting out of residential quarters to employees is subservient and incidental to the main business, the property is considered as occupied by the owner for the purpose of his own business. And if employer charges rent from the employees, such rent is taxable as business income under IFBP.
- K.D. Thakur Vs. CIT: If an husband makes a cash gift to his wife who purchases a house property with the gifted money, the husband will not be deeded as deemed owner of the property u/s 27 (i).
However, rental income from the house property so purchased will betaxable in the hand of Husband u/s 64 (1) (iv)
- Sarvamangla Properties Ltd Vs. CIT: Where the property owned by a partnership firm, it is the firm which is chargeable to tax under IFHP. Not the partners of firm.
- CIT Vs. Jetta Lal Nanji & Bros.: Where a property consisting of seven flats is constructed out of funds of a firm but by debiting it to the accounts of its partners , it was held that each one of the partners was the owner of a flat assigned to him.
- CIT Vs. Ansal Housing and Construction Ltd. : assessee engaged in business of construction and sale of flats is liable to pay tax on notional rent in respect of unsold flats, owned by the assessee at the end of the relevant financial year.
IFOS: Income from Other Source
IFHP: Income from House Property
IFBP: Income from Business Profession
IFCG: Income from Capital Gain
IFS: Income from Salary
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